Friday, October 30, 2015

Labor Share and what?


Labor Share and Potential GDP

Wednesday, October 28, 2015

GDI: Point of interest


I took the highest "Shares of GDI" series for "Compensation of employees" and divided it by the highest "Shares of GDI" series for "Corporate profits". The resulting graph runs from 1929 to 2014 and it all stays between 0 and 20 except during the Great Depression, when it drops down around -180, then bounces back up.

I chopped off those early years to get a better look at the rest of it:

Graph #1
Oh...

This is employee compensation as a multiple of corporate profits. In the 1950s and early 1960s -- the "Golden Age" -- compensation ran low, at about five times the profit level. Then, during the "Great Inflation" compensation increased, relative to profits. In the 1980s, compensation ran high, at about eight times the profit level. Since the early 1990s, compensation declined relative to profits, and volatility has been greater.

Graph #2: Same as Graph #1, with Trend Lines Eyeballed In
Not what you expected, is it.

Employee compensation was low in the good years. It was high in the Reagan years.

Know what I think? I think there must be more to the story than compensation and profits.


I wanted to check my trend guesstimates, so I recreated the graph with a Hodrick-Prescott calculation:

Graph #3: Data from Graph #1, plus a Hodrick-Prescott Trend (ƛ=100)
Now, that's interesting. The red line looks like a sine curve. It suggests a repeating pattern. Now that's interesting.

Tuesday, October 27, 2015

GDI: Corporate profits


At FRED, 25 series come up in a search for shares of gdi.

Five series come up for shares of gdi: Corporate profits. These five:

Graph #1
The highest (most all-encompassing) of the five is: Corporate profits with inventory valuation and capital consumption adjustments, domestic industries.

Monday, October 26, 2015

GDI: Compensation of employees


At FRED, 25 series come up in a search for shares of gdi.

Seven series come up for shares of gdi: compensation of employees. These seven:

Graph #1
The highest (most all-encompassing) of the seven is Compensation of employees, paid.

Saturday, October 24, 2015

Compensation of Employees as a Share of Gross Domestic Income


Graph #1: Compensation of Employees as a Share of Gross Domestic Income
Falling since 1970.

Friday, October 23, 2015

It needs work


Last Sunday I showed Ed Lambert's corporate "after tax profits in real terms" on a graph with "Labor Share". Why labor share? Because Lambert says "labor share of income must be raised because increased volume of business with labor would allow for better profits."

I said the graph was "interesting. But it doesn't support the view that boosting labor share will boost profits."

The graph shows that when labor share falls slowly, business profits increase slowly. And when labor share falls rapidly, business profits increase rapidly. One has to assume, then, that when labor share increases slowly, business profits fall slowly; and when labor share increases rapidly, business profits fall rapidly. Thus, the graph does not support the view that boosting labor share will boost profits.

I don't know how that analysis sits with you, but I didn't like it much myself. As I said on Sunday,

I agree with Lambert on the labor share thing... You can't squeeze the life out of one sector of the economy and still expect the economy to be just fine. It doesn't work that way. I agree with Lambert that the fall of labor share is a problem.

Not explicit, my thought at the time was not that Lambert was wrong to say falling labor share is a problem. (I agree with him on the labor share thing.) My thought was: It's not the right graph.


Lambert says

After the 2001 recession, labor share of income began falling to never before seen lows...

What has been the result? Firms have been able to increase after tax profits in real terms to new records after the 2001 recession.

But he doesn't show a graph comparing labor share and after tax profits. So I took the bait. I took his graph of after tax profits and added labor share to it. And looking at that graph, I can only say it does not support the view that boosting labor share will boost profits.

Lambert's argument, however, is not so simple. He says firms increased profits since 2001 by finding alternative sources of income. By finding alternatives, rather than depending on labor to spend enough to boost business profits:

Firms began to open up new ways to increase profits through the channels of the Financial sector, government and foreign markets. Interest rates have been falling. Money is cheaper. Effective tax rates have been falling. Outsourcing increased. Sales in foreign countries increased. Firms became less dependent upon domestic labor’s income.

Profits went up even though sales fell, Lambert says, because financial costs went down and taxes went down for business and foreign markets expanded. His conclusion:

For me, the solution lies in making firms more dependent upon the money flows with labor... Firms will have to realize that labor share of income must be raised because increased volume of business with labor would allow for better profits.

Could be. But Lambert leaves me in exactly the same position as before: lacking a graph that shows evidence to support his argument.

Last time, I took his profits graph and added labor share myself. But that graph couldn't carry the load. I was thinking about this. And it seems to me that a better graph might be one built on Shares of Gross Domestic Income.


I went to FRED and searched for shares of gdi. FRED returned one page of results. 25 series. It's kind of a jumble for me. I'm not familiar with the way they break down the numbers into categories. So I have to look at that.

I saved the FRED page as a text file (that's a menu option in FireFox) and went through the file by hand, keeping Series ID info and deleting a lot of HTML formatting. Tedious crap.

Yeah. After I got seven of the 25 entries reformatted, I thought to check the source where FRED gets this data: BEA. Found Table 1.11: "Percentage Shares of Gross Domestic Income". That might be better. The work is done already.

Here's what I was looking for. A breakdown by category, the components of GDI:

Components of GDI. From BEA Table 1.11
For some reason (or maybe for no reason) BEA does not provide a direct link to their tables. I've got Table 1.11 on the screen now, but the URL

http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&904=2007&903=52&906=q&905=2014&910=x&911=1

gets me to their "National Data" page. From there, click "SECTION 1 - DOMESTIC PRODUCT AND INCOME" and read down the list to find Table 1.11. And then "Modify" and "Select all years" and "Refresh Table".

Could be worse. (Have you tried ONS?)

Anyway, I can look on FRED's list of 25 series for the ones that are not indented on the BEA list. The major categories, not the sub-categories.

For some reason, or maybe for no reason, the "Net Operating Surplus" series starts in 1959. The other ones all start in 1929.

Graph #1: (Stacked Graph.) Not Useful. "Net Operating Surplus" Starts Late
You can see everything drops suddenly there just before 1960. That's when "Net Operating Surplus" gets added into the mix, taking a share of the 100% total on this stacked graph. So all the other shares fall.

Couple other things to see: 1. The purple line runs very close to the blue line. On a stacked graph, that means that the purple line doesn't add much to the total. The purple line is "Subsidies". So we know that subsidies are a small part of the total. And

2. The blue line, running right close to the purple one, runs low on the graph. Near the bottom of the plot window. But after 1959, it runs between 50 and 60 percent of GDI. That's more than half the total. FRED starts the vertical axis at 50%, not at zero. The blue line looks lower than it is in fact.

That blue line is Compensation of employees.

One other thing about this graph: Compensation of employees -- that blue line -- trends down since 1970. The green and red lines appear to trend down since 1980.  Doesn't stand out on this graph, but it is there if you look: "Net operating surplus" is crowding out "Compensation of employees" and the other categories.

Net operating surplus is mostly the "surplus" of "Private enterprises". Proprietors' income and corporate profits and such.

It needs work, but I want to say this graph supports Ed Lambert's view.

Thursday, October 22, 2015

Words


At work we ... // Nope.

I'm retiring at the end of this year, two, two and a half months from now. More time for writing, I hope. Anyway:

At work we have very specific terminology for the things we do. Use a piece of wood one way, it's a "scab". Use it a different way, it's a "splice". Used a third way, it's a "waler".

Our terminology is important because, as long as we're careful to use it when we talk, it's easy to convey meaning. I do drawings for a living, drawings of things to be built. I can always draw a sketch to show what I'm talking about, what my question is, or like that. But I don't need to always draw a sketch, because we have the terminology.

Words are important.


I went back to Angry Bear to read Ed Lambert's post again, then checked out Robert Waldmann's How Many Equations Should There be in Macroeconomic Models?

Who could resist a title like that??

I started getting out of my depth in the second half of it, but the part I understood I thought was great. Waldmann writes, for example,
Standard DSGE models still contain no housing sector. So the profession is attempting to understand the great recession while ignoring housing completely.
Wow!

I should say, too, that this was the easiest read I've ever had in a Waldmann post.

//

There was a comment by William Ryan on Waldmann's post. In part:

What is important to you may not be important to me depending where you stand in the profit margin department. It becomes a matter of how we see things...

I think I know what "profit margin" means. But I looked it up anyway. Profit margin is "the amount by which revenue from sales exceeds costs in a business", Google says. Profit margin is an amount (as opposed to a rate).

Yeah, profit. You spend money to make money. After the money comes in, you subtract out how much you spent, and the rest is profit.

"Profit margin" is the same as "profit" I guess, if we go by the Google definition. I'm not comfortable with that. Terminology is important. Maybe "profit" and "profit margin" are the same. I don't know. So I did a little more digging.

I found a page from Chron -- some relative of the Houston Chronicle apparently. Hearst newspapers. The page is What Is the Difference Between Profit Rate and Profit Margin Ratio? Seemed like it might be useful.

It's garbage. I want to go thru it a piece at a time. First, the opening:
Understanding the difference between profit rate and profit margin ratio is critical for a small-business owner.
The rest of that paragraph explains why it is important to you.

Not off to a good start here.

Next, the Profit Rate:
Your profit rate is the percentage of your income that is profit. You can calculate this by deducting your total expenses from your total income, and taking the amount remaining as your profit. Divide the profit by your total costs, and the result will be the rate, or percentage, of profit that you make on your sales.

"Deducting" means subtracting. So, total income - total expenses = profit
And then, profit / total costs = the rate of profit. Profit ratio. (For percentage you have to multiply the ratio by 100.)

But terminology is important. I don't care if we say "total expenses" or "total cost". But we should pick one, and stick with it. Pick and stick. So
income - expenses = profit
And then,
profit / expenses = profit rate

To make matters worse, they introduce the topic by saying

Your profit rate is the percentage of your income that is profit.

Percentage of income they say, not percentage of expenses. To figure percentage of income, you have to divide by income. But they don't want you to divide by income. They want you to divide by total expenses. To be consistent, they should have introduced the topic by saying

Your profit rate is your profit as a percentage of your costs.

I don't know if that's correct. But at least it would have been consistent.

What the Chron article is doing is like if I went to work, learned my definitions for "scab" and "splice", and then started using the two words interchangeably, as if they were the same. Oh my god, it defeats understanding! and it defeats the purpose of having a terminology.

There is a word for that: Stupid.

Next, an Example:
A home-based, small business brings in $5,000 a month in sales of dog clothing and accessories. The cost of goods sold, including the purchase of materials and wholesale products, the cost of labor to make and sell the products, and the business overheads add up to $3,500 a month. Deduct the total expenses from the total income, and the profit is $1,500 a month. To calculate the profit rate, divide $1,500 by $3,500 and the result is a profit rate of 43 percent.
Forty-three percent. Oh, that's realistic.

"Overheads" -- plural?

I hate examples that are full of words. I don't need to know it is "A home-based, small business". (And they don't need that comma.)

I need to know we're looking at "$5,000 a month in sales". I don't need to know about dog toys. Dog clothing and accessories, whatever. (Hey -- "dog clothing" is funny. But it is buried in so many mistakes that I didn't even see it till now.)

Maybe I do need to know all of

The cost of goods sold, including the purchase of materials and wholesale products, the cost of labor to make and sell the products, and the business overheads add up to $3,500 a month.

I'd be happy with just "expenses add up to $3500 a month". But expenses are technical, too. Very, very well defined by the IRS. Not clearly defined, perhaps, but defined in many, many words.

But really, the article shouldn't be explaining the tax code. So really, I just need to know we have $5000 in sales and $3500 in expenses. (I don't even need to know "a month".)

Expenses = $3500
Income = $5000

Income - Expenses = Profit
$5000 - $3500 = $1500

Profit = $1500

$1500 / $3500 = 43%

Profit Rate = 43%

Done.

Next, Profit Margin Ratio:
Profit margin ratio is the ratio of the business's gross profit in relation to sales. Using the example above, your net income is $1,500 a month. Divide this figure by the total income of $5,000 a month, and your percentage of income that constitutes profit is 30 percent. This means that the profit margin ratio is 0.30:1, or 30 percent of each dollar earned. This tells potential investors that 30 cents of every dollar you make in sales is profit, which helps identify whether your business is profitable.

... helps identify whether your business is profitable.

Yeah -- because you couldn't tell whether your business is profitable from the 43% number you got before.

Good grief.

So what else do we have here? New terminology: "gross profit" and "net income". Neither has been used before in the article. So you've got new, undefined terms. Does that help the understanding? Does it convey?

No.

"Gross profit" is the same as "net income" and both are the same as the word "profit" as used in the Example paragraph and the Profit Rate paragraph. So: Profit margin ratio is profit in relation to sales. Oh, and "sales" is the same as "income" -- but gross income, not net.

So how does "Profit Margin Ratio" differ from "Profit Rate"? The one is profit divided by income. The other is profit divided by expenses.

That's all they needed to say.

p.s.

I have no confidence that what I learned from the Chron article is right, because the article is so badly written.

Sunday, October 18, 2015

I like Ed Lambert's conclusion


Jazzbumpa:
Art -

O/T here, but I want to recommend Ed Lambert's latest post at A. B.

Serious food for thought.

http://angrybearblog.com/2015/10/turner-debtdel-fallls.html

Cheers!
JzB

Dunno if there's anything to it, even after I read it once. I'll take another look now, on your time. Here's a summary of the first part of Lambert's Angry Bear post:
Adair Turner lays out an exquisite economic analysis on many layers. Yet I question him… Is it truly deleveraging debt along side fiscal consolidation that is making some economies sluggish?

I look at another cause for economic sluggishness… the fall in labor share. I see the fall in labor share as a fall in effective demand, which has lowered economic potential and the social benefits in the economy.

Every time you copy and paste a line of text from an Angry Bear post you get a line like "See more at: http://angrybearblog.com/2015/10/turner-debtdel-fallls.html#sthash.A73gaDq0.dpuf" appended to the text you copied. It's annoying, and it gets tiresome. Serious food for thought, there.

Anyway, Lambert ends this part of his post with a great conclusion:

We can say that deleveraging debt and the fall in labor share both contribute to the economic sluggishness. - See more at: http://angrybearblog.com/2015/10/turner-debtdel-fallls.html#sthash.A73gaDq0.dpuf

Deleveraging and the fall of labor share both contribute to the problem. Yes! The economy is a complex thing. Causes have consequences, and consequences become causes. It is important to point out, once in a while, that everything depends upon everything. (But what was it Schumpeter said?)

Then Lambert farts in the applesauce. Turns out, he only brought the subject up so he could talk about his pet peeve:

But since Adair Turner did not talk about the fall in labor share, I will.


The second part of Lambert's article is titled The Channels of Money Flow for Business. Lambert provides this interesting image:

Source: Edward Lambert
The picture focuses on "firms" -- the domestic nonfinancial business sector -- and shows four other sectors with which firms engage in trade: foreign, financial, labor, and government. Firms have flows of funds to and from each of these other sectors.

"After the 2001 recession," Lambert says, "labor share of income began falling...":
After the 2001 recession, labor share of income began falling to never before seen lows. Consequently relative sales to labor also decreased because labor had less income relative to production. So overall money flows between labor and firms has been growing slow. Firms have had less ability to profit from labor due to decreased overall money flows with labor. So in response, how did firms compensate for the decreased flows with labor?

Firms began to open up new ways to increase profits through the channels of the Financial sector, government and foreign markets. Interest rates have been falling. Money is cheaper. Effective tax rates have been falling. Outsourcing increased. Sales in foreign countries increased. Firms became less dependent upon domestic labor’s income.

So firms have increased money flows in other channels other than with labor. What has been the result? Firms have been able to increase after tax profits in real terms to new records after the 2001 recession.

I agree with Lambert on the labor share thing. Consumers consume. We spend most of our income. (We did, anyway, before the crisis.) So if firms wanted to boost business sales, they could get their wish by paying higher wages: Consumers would have more money, consumers would spend more, business would bring in more revenue, presto, magic, done. You can't squeeze the life out of one sector of the economy and still expect the economy to be just fine. It doesn't work that way.

I agree with Lambert that the fall of labor share is a problem. But I don't agree with his explanation of events.

He documents the claim that "after tax profits in real terms [hit] new records after the 2001 recession" by showing a graph of profit with price increases stripped away.

Why Lambert shows profit "in real terms" I don't know. Those record highs are even higher if you leave inflation in. And for crying out loud, he used the CPI in his calculation, rather than the Producer Price Index or something like.

But you can take "labor share" and add it to Lambert's profits graph, and get an interesting picture:

Graph #1: Corporate Profits (blue) and Labor Share (red)
After the 2001 recession profits started going up like crazy, and labor share started dropping like crazy. Of course. Money doesn't disappear when you spend it. It just goes into a different pocket.

Before the 2001 recession, profits increased gradually while labor share fell gradually. So money moved slowly from workers' pockets to owners' pockets before 2001, and fast after 2001.

This is interesting. But it doesn't support the view that boosting labor share will boost profits.

//

Lambert's graphic of money flow for "firms" considers both "Foreign Markets" and the "Financial Sector" to be external to firms. So I have to assume his data for firms is domestic and nonfinancial. That's fine; I just want to be clear.

If he is looking at what FRED calls domestic nonfinancial business ...

I can't find profits at FRED for business. I can only find profits for corporate business. So I want to assume that Lambert's "firms" means domestic nonfinancial corporate business. This is reasonable, because his profits graph shows corporate profits.

(I'm trying to use the right data here, to make a valid evaluation of Lambert's post.)

If he is looking at what FRED calls domestic nonfinancial corporate business, he shouldn't be showing a graph of corporate profits. He should be showing nonfinancial corporate business profits. There is a difference:

Graph #2: Corporate (blue) and Nonfinancial Corporate (red) Profits
(Lambert used the blue one.)

Funny thing, though. The assets of nonfinancial corporations are increasingly financial assets:

Graph #3: Financial Assets as a Percent of All Assets of Nonfinancial Corporations

Nonfinancial corporations have been increasing their holdings of financial assets. This means the profits of nonfinancial corporations are increasingly financial profits. You have to wonder what nonfinancial corporate profits would look like if we exclude their financial profits. This graph assumes the profit rate is the same for financial and nonfinancial assets:

Graph #4: Nonfinancial Profits of Nonfinancial Corporations (red) and Total Corporate Profits (blue)
The blue line shows total profits of corporations. The red line shows the nonfinancial profits. The space between the red and blue lines represents financial profits.

The blue line is unchanged from Graph #2. The red line is much lower now.

//

Next, take labor share and add it to the previous graph:

Graph #5: Total Profits (blue), Nonfinancial Profits (red), and Labor Share (green)
Before the 2001 recession, profits increased gradually while labor share fell gradually. After the 2001 recession profits started going up like crazy, and labor share started dropping like crazy. Money moved slowly from workers' pockets to owners' pockets before 2001, and fast after.

It is pretty easy to see the sudden increase in profits after 2001, and a matching decrease in labor share. It is also easy to see that the sudden increase in profits was mostly financial profits. Profits made at the expense of those who are in debt.

So, when Ed Lambert says

After the 2001 recession, ... relative sales to labor also decreased because labor had less income relative to production.

we know he is not quite correct. Labor had less income relative to finance, certainly. Relative to production, not so much.

But when Ed Lambert says

For me, the solution lies in making firms more dependent upon the money flows with labor. That means reversing the policies that increased profits through money channels other than with labor.

I think he is exactly right. Lambert's focus is the fall of labor share. Mine is the rise of finance. Yours may be the decline of tax rates on the wealthy and on big business. And maybe all of us want to see our trade deficit reduced. If so, all of us are calling for "making firms more dependent upon the money flows with labor."

// related post: "One for You, Three for Me"

Saturday, October 17, 2015

The ultimate utopia


cochrane:
Tuesday, October 13, 2015
Open Borders
Alex Tabarrok has a very nice and very short piece at the Atlantic, The Case for Getting Rid of Borders—Completely. (HT Marginal Revolution)

In the Soviet era, there were walls and guards with guns, and we deplored that people were not allowed to cross the border. Is it that different that the guards with guns are on the other side of the walls?

If you're a liberal, you should cheer the policy with the greatest chance of elevating the world's poor and reducing global inequality. If you're a conservative, believe in the rights of individuals and freedom, don't like minimum wages, unions, protectionism, and government control, it makes little sense to switch sides on this one issue.

The nation-state has not done well lately. A time of troubles, Toynbee would say. There's no denying it.

I wouldn't dream of denying it. But I'm not one who likes change: I don't want to throw away the nation-state. I want to fix it.

//

If you take Europe as an example, and start erasing internal borders, nation-state borders -- gradually, just to improve economic conditions (sucker!) -- it turns out the economy goes to shit anyway, goes to shit in large part because of border-erasing. Specifically, because of the elimination of national money in favor of the euro. But I don't have to tell you that. You've been telling me.

When things go bad, the word comes down that to make things better they need a stronger supra-national government. The problem, they say, is that the suppression of national sovereignty was not complete enough. They need not only a unified money but also a unified fiscal -- tax policy in common throughout the continent.

You know, that could work. But I don't think we want it. Do you get much face time with the U.S. President? How about your state governor? No? You stand a much better chance of getting a word with your mayor or town supervisor. Local government is more responsive to its people. National government is already unresponsive. Supra-national government would be even less responsive. It is less responsive. They do what they want, and they tell you it's good for you.

People like cochrane seem to believe that crap.


You want a global, unified state? Ha! So did Gene Roddenberry.

So do I. But the driving force behind global unification is the desire of the wealthy few to expand markets in order to capture even more wealth. So the time is not yet right.

If we can't make the economy good with the level of government we have now, then making government more comprehensive and less responsive is not the answer.

Friday, October 16, 2015

The Replacement for TCMDO


I find a blurb under FRED NEWS: FRED Expands the Financial Accounts of the United States Data Set. I go there. Under L.208 Debt Securities I find a page of 52 data series. First on the list: All Sectors; Total Debt Securities; Liability.

Looks interesting, I think. I wonder how it compares to TCMDO, now called "All Sectors; Credit Market Instruments; Liability, Level". I remember Jim showing me that financial debt is much higher than the financial part of TCMDO. I'm thinking maybe the new series is a higher, more honest measure.

I compare the two on a graph:

Graph #1: Blue is the new series. Red is the old TCMDO.

Blue is the new series. Red is the old TCMDO. The new series is much lower than TCMDO debt. Much lower. And TCMDO is discontinued now. News to me.

That's one way to bring the debt number down.


Looked into it a little more. At a site called One Political Plaza, down below a screenfull of blurb, I found

Another $2.7 Trillion In U.S. Debt: Fed Quietly Revises Total US Debt From 330% To 350% Of GDP

I'm complaining the debt number was lowered; they're saying it was increased. Had to read more.

From a post by Doc110:

Here is what happened to the missing so very critical data series, straight from the horse's mouth:

Board of Governors' statistical release on the Financial Accounts of the United States
http://www.federalreserve.gov/releases/z1/z1_technical_qa.htm


Q: In the September 18, 2015 release of the Z.1 Financial Accounts of the United States, some tables in the summary section on credit market instruments seem to have disappeared. What happened to these tables and where can I find the equivalent data series?

With the September 18, 2015 Z.1 release, the classic presentation of the instrument category "credit market instruments" has been discontinued and replaced with two new instrument categories, "debt securities" and "loans".

Reporting debt securities and loans separately brings the Financial Accounts more in line with the international standards for national accounts. The debt securities instrument includes open market paper, Treasury securities, agency- and GSE-backed securities, municipal securities, and corporate and foreign bonds.

The new loans instrument includes depository loans not elsewhere classified, other loans and advances, mortgages, and consumer credit. Together, debt securities plus loans include all of the financial assets or liabilities previously included in credit market instruments.

While the underlying instrument categories that make up the sum of debt securities and loans are the same as those in old "credit market instruments" concept, changes to a few of these categories make the new sum of debt securities and loans larger than in previous publications.

And a bit more:
Q: Why is the level of total debt outstanding in the September 18, 2015 release of the Z.1 Financial Accounts of the United States so much higher than it was in the previous Z.1 release?

Total debt outstanding was revised upwards due to methodology changes to both Treasury securities and security credit. Total debt outstanding is now the sum of two new instrument categories: debt securities (table L.208) and loans (table L.214). The aggregate of these instrument categories was previously called credit market instruments.

Treasury securities, part of the debt securities instrument category, now include non-marketable Treasury securities held by federal government defined benefit retirement plans (FL343061145).

The inclusion of federal government defined benefit retirement plans resulted in an upward revision to the level of federal government debt of about $1.408 trillion for 2014: Q4.


Okay. So in order to get TCMDO back, I have to put it together from two pieces.

Here is the "Loans" link from the FRED page I linked at top:

https://research.stlouisfed.org/fred2/categories/33729

First item on the "loans" page is All Sectors; Total Loans; Liability.

Sounds like a good match for "All Sectors; Total Debt Securities; Liability". And, again, the total of those two is the new TCMDO. So I added 'em together and compared 'em to TCMDO:

Graph #2: The Sum of Two New Series (blue) and the Discontinued TCMDO (red)
Okay. I have my debt number back.

Thursday, October 15, 2015

Maybe they wouldn't need the $70,000 if they gave up the Park Avenue address


I got some junk email last night:
Dear Naked Capitalism Reader,
...
We are launching the 2015 Naked Capitalism fundraiser today. Last year, over 1200 readers gave more than $70,000 to fund Naked Capitalism's work.
...
Please visit Naked Capitalism and click on our Tip Jar to donate, or learn more about what we've done in the past year and our plans for the upcoming year.
...
Yves

Copyright © 2015 Aurora Advisors, Inc., All rights reserved.
Thanks so much for your contributions to Naked Capitalism.

Our mailing address is:
Aurora Advisors, Inc. 903 Park Avenue, 8th Floor New York, NY 10121 USA


Maybe they wouldn't need the $70,000 if they gave up the Park Avenue address.

Wednesday, October 14, 2015

Except sometimes


I thought it would be easy to find, you know, at the Fed, the reserve requirement as set by the Fed.

I thought wrong.

I didn't give up yet. But I did find an interesting distraction. Total reserves as a percent of required reserves around the time of the Great Depression:

Graph #1: Reserves Held as a Percent of Reserves Required, 1918-1944
A couple mountains there on the right. Reaches up around 200% of required reserves. Twice the requirement. Pretty substantial.

That reminded me of the increase in total reserves we've seen since 2008. So I went back to FRED, found "Total Reserves of Depository Institutions", divided it by
"Required Reserves of Depository Institutions", and put it on the graph along with the 1918-1944 data. The new data runs from 1959 to 2015. So there's a gap of 15 years or so with no information. That's okay:

Graph #2: Reserves Held as a Percent of Reserves Required, 1918-2015
One mountain there on the right, now. Green. Reaches up around two thousand percent of required reserves. Twenty times the requirement.

The blue mountains from Graph #1 have moved over to the left and, at two hundred percent of the requirement, are almost nothing compared to the recent spike.

Oh -- that gap there, between the end of the blue line and the start of the green, you could figure that's just a straight line connecting the blue and green together. So all the time we have reserves held running right in the neighborhood of 100% of the required amount, except sometimes.

Sunday, October 11, 2015

Völkerwanderung


From Thayer Watkins:
The disintegration of a civilization involves a time of troubles, such as a time of wars between the nations which are parts of the civilization. This time of troubles is followed by the establishment of a universal state, an empire. The existence of a universal state such as the Roman Empire is evidence that the civilization has broken down.

Ultimately the universal state collapses and there follows an interregnum in which the internal proletariat creates a universal religion and the external proletariat becomes involved in a Volkerwanderung, a migration of peoples.
 
From Nigel Raab:
Toynbee sought to establish a grand narrative that toured the world and explained the structure of societies around the planet.... He argued that societies could be "affiliated" or "apparented" over swaths of time if they had certain tokens in common. The prerequisite tokens were defined as "a universal state," "a universal church," and a Völkerwanderung ...
 
From Google:

 
From Peter Myers:
The re-established Syriac universal state had provided a political framework for the development and spread of a Syriac universal church in the shape of Islam. The subsequent decline of the Caliphate had been followed by a Volkerwanderung...

From at least half-way through the second millennium B.C. onwards, until the Mycenaean Civilization foundered, Minoan-Helladic-Mycenaean cultural influences had been playing on the coast of Syria with increasing intensity; and, after that, the Volkerwanderung of the 'Sea Peoples', which had been set in motion soon after the beginning of the twelfth century B.C. by the Mycenaean Civilization's last convulsions, had deposited two peoples from the Aegean or from its hinterlands, the Zakkaru (Teucrians) and the Philistines, along the southernmost stretch of the Syrian coast ...

'The Book of Judges makes it clear that it was not by defeating the Canaanites, but by defending them, that Israel obtained a dominant position in Palestine.' The common enemy in this chapter of history was the Nomad peoples who were now trying to force their way into Palestine at the Israelites' heels. In the period following the end of the Hebrew-Aramaean Volkerwanderung the Israelites were in danger of suffering the fate of being invaded and overrun that they had inflicted on the Canaanites ...
 
From The Wall Street Journal
The emergence of southeastern Europe as ground zero in the continent’s migration crisis is raising concerns that the region’s chaotic response to the influx is reawakening old tensions across the conflict-scarred Balkans.

Until the spring, the majority of migrants coming to Europe did so by making the treacherous passage across the Mediterranean to Italy via Libya. But as that crossing has become more difficult and more refugees are coming from Syria, many are traveling by way of Turkey to Greece and up through the Balkans—spurring countries along the way to clash over how to stem the influx.

Recent moves by EU members Hungary, Croatia and Slovenia to close parts of their borders have left transit countries in the Balkans—especially Serbia and Macedonia—struggling to cope with a flood of migrants seeking to continue north toward Germany and other more affluent countries.
 
From MSNBC:
Constructing an impassable wall along the U.S.-Mexico border would be a tall order — even for master real estate developer and 2016 GOP presidential candidate Donald Trump.
 

Saturday, October 10, 2015

Inflation and Oil: Dan Lynch's Numbers


Dan Lynch offers this graph:

Graph #1

"Definitely a correlation after OPEC kicked in," Lynch says. After 1973, I'm thinking.

Sure. Two major spikes in prices (red) match up well with two major oil price spikes (blue). And after those two spikes, there seems a lot of similarity between red and blue on the graph. Not always the size of the movements, perhaps, but definitely the direction of those movements.

On the other hand, the similarity between the red and the blue is not obvious in the years before 1973.

That's okay... That was Dan Lynch's point, I think. His graph shows the similarity after OPEC kicked in.

Yeah.

Again, Dan Lynch:

That said, prior to OPEC, inflation was largely influenced by employment (which is probably a reflection of how close the economy is to capacity). So in the 60's what little inflation existed was driven by employment/capacity.

Now I have a problem. Usually, I think, the explanation given for inflation in the 1960s and before OPEC is the war in Vietnam. Or, the combination of wartime spending and the war-on-poverty spending of President Lyndon Baines Johnson. Taken together, the spending on Vietnam and poverty could be considered to have pushed the economy toward capacity or beyond, so that inflation resulted. In other words, Dan Lynch's explanation of the pre-OPEC inflation is pretty much the standard explanation of the pre-OPEC inflation.

That's not the problem.

The problem is, you have to argue about capacity, dedicate yourself to capacity as a problem, and describe inflation as the result of bumping up against capacity... and then you have to suddenly change your mind and say no, no, not capacity, now oil is the cause of inflation, the price of oil.

I don't do economics that way. The cause is the cause. You don't drop one explanation and adopt another every time the wind changes direction. If you do you're describing results, not causes.

What happened to capacity, after the oil price spike? The economy went downhill:

Before the early 1970s, our standard of living doubled every generation and a half. Now it will take twelve generations for our standard of living to double!
- Ross Perot in United We Stand, 1992

Surely, capacity was no longer driving inflation! Now, instead, oil is given as the cause of inflation. The trouble with that is, all through the 1960s the general price level was rising, but the price of oil wasn't rising. So when OPEC kicked in, perhaps the increase in the price of oil was only to get oil back even with other prices again. Not my idea. It was on the news.

I heard once, during one of the gasoline-price spikes of the 1970s, that OPEC was just raising prices to make up for the declining dollar. Never heard that again, which I thought was really odd.


I recreated Dan Lynch's graph at FRED. He shows "percent change from year ago" for both oil and inflation, but he shows one on the left axis and one on the right. I want to put them together on the same axis. You get a better comparison that way.

Also, his graph runs from 1960 to 1991. I want to see more years -- especially more early years. Oh, and I want to see the original numbers. Dollars per barrel for oil, and the CPI number for the CPI.

Okay, I looked at that. There's too much of a gap between the lines. I can't see similarities and differences. So I decided to set both series equal to each other, back at some early date.

I did the "Index" data transformation for each series, setting the November 1948 value to 100 for oil and for inflation. Now the two lines are close. Identical, in November 1948.

Then, to get a better look at the early years, I ended the graph in January 1974, just as the OPEC price hikes were making an appearance:

Graph #2: Inflation (red) and the Price of Oil (blue)
Spot Oil Price copyright, 2014, Dow Jones & Company.
The red and blue lines are pinned together in 1948, just at the start of the first recession shown on the graph. What happened before that date, I cannot say without more data. But what happened after that date is pretty obvious. Inflation (the red line) kept going up. The price of oil (the blue line) lagged behind.

From 1958 to the blue spike at the right end of the graph, the price of oil clearly lagged behind the rising price level. Finally, in 1974, OPEC had enough of that. They raised the price of oil.

Now... What shall we say was the initiating cause of inflation? What was the prime mover? What was the original cause of inflation? Oil?

No.

Oil was a result.

Thursday, October 8, 2015

Focusing the eye


On Monday I evaluated a detail from something that Roger Farmer said. I looked up the PDF Monetary Policy Rules and Macroeconomic Stability: Evidence And Some Theory by Richard Clarida, Jordi Gali, and Mark Gertler.

While reading thru that paper, what I read of it, I came across something that absolutely bears repeating. This begins on page 166 of the PDF (page 20 of 34 in the PDF reader):
At a minimum, the notion that the oil shocks can largely account for the volatile behavior in output during the 1970s period is open to debate...

While there is room to debate the importance of the oil shocks for real activity over this period, the case that these shocks alone account for the sustained high inflation is completely unpersuasive. Note first that the Hamilton evidence is silent on the link between the oil shocks and inflation. On the other hand, as De Long {1997} emphasizes, timing considerations make the oil shocks suspect as the leading explanation for inflation over this period. Figure III illustrates this point. The figure shows three-quarter centered moving averages of the real oil price against inflation over the period 1960:1–1997:1.


As De Long argues, the initial build-up of inflation in the late 1960s and early 1970s occurs prior to the first oil shock. Indeed, until the time of the first oil shock in 1974, the real oil price is steadily declining, while inflation is steadily rising. The real oil price then remains constant until late 1979, the period of the second major oil shock. Note again that there is a steady rise in inflation over a three-year period prior to this shock. In turn, the decline in inflation in the early 1980s appears to lead the decline in the real oil price.


Once inflation got going, of course the rising price of oil became a major contributor. That's not the point.

It wasn't the rising price of oil that got inflation going. That's the point.

If it wasn't oil, it was something else that got inflation going. That's why this matters.

What was it? That's the question.

It was the rising cost of finance. That's my answer.

See?

Wednesday, October 7, 2015

Inflation and Oil


On Monday I evaluated a detail from something that Roger Farmer said. I looked up the PDF Monetary Policy Rules and Macroeconomic Stability: Evidence And Some Theory by Richard Clarida, Jordi Gali, and Mark Gertler.

While reading thru that paper, what I read of it, I came across something that absolutely bears repeating. This begins on page 166 of the PDF (page 20 of 34 in the PDF reader):
At a minimum, the notion that the oil shocks can largely account for the volatile behavior in output during the 1970s period is open to debate...

While there is room to debate the importance of the oil shocks for real activity over this period, the case that these shocks alone account for the sustained high inflation is completely unpersuasive. Note first that the Hamilton evidence is silent on the link between the oil shocks and inflation. On the other hand, as De Long {1997} emphasizes, timing considerations make the oil shocks suspect as the leading explanation for inflation over this period. Figure III illustrates this point. The figure shows three-quarter centered moving averages of the real oil price against inflation over the period 1960:1–1997:1.


As De Long argues, the initial build-up of inflation in the late 1960s and early 1970s occurs prior to the first oil shock. Indeed, until the time of the first oil shock in 1974, the real oil price is steadily declining, while inflation is steadily rising. The real oil price then remains constant until late 1979, the period of the second major oil shock. Note again that there is a steady rise in inflation over a three-year period prior to this shock. In turn, the decline in inflation in the early 1980s appears to lead the decline in the real oil price.

Monday, October 5, 2015

Calling a halt


If memory serves, late in The Bourne Ultimatum -- not the best movie in the trilogy -- David Strathairn's character Noah Vosen (not the most interesting character in the movie) calls a halt to everything so that his team can follow a new lead in pursuit of Jason Bourne. I have to do that too, sometimes, drop everything in order to pursue some new nit. This is one of those times.

Not that Jason Bourne was a nit.

According to my Blogger stats, there was a recent visit to my old post Marcus Nunes: A last ditch defense of Inflation Targeting. That induced me to go read it again.

It's pretty long, but I still like it. Anyway, in that old post I had quoted Marcus Nunes, and Marcus had quoted Roger Farmer, and I had followed Marcus's link and used some of Farmer's stuff. I quoted this from Farmer:

Volcker followed a policy of strict control of the money supply, as opposed to control of the interest rate. This policy rapidly reduced inflation at the cost of a period of high interest rates and a big spike in unemployment.

That strikes me now as a key piece of Federal Reserve history. Not the result-of-policy part, no. The how-policy-was-implemented part: "strict control of the money supply, as opposed to control of the interest rate." I've known about that for a long time, but it is usually just mentioned without any specifics that I could grab and put into a graph.

I tried to track it down. But the link to Farmer's PDF is broken. So I parsed the link and went looking for a PDF named "Monetary Policy Rules" and the name Roger Farmer. First thing I found was NBER Working Paper 18007, THE EFFECT OF CONVENTIONAL AND UNCONVENTIONAL MONETARY POLICY RULES ON INFLATION EXPECTATIONS: THEORY AND EVIDENCE by Roger E.A. Farmer. PDF, 23 pages. It's not the one I was looking for. But I figure maybe Farmer repeats some of the things he said elsewhere, as Milton Friedman did in his books. Worth a shot.

I found some useful specific details on the history of Fed policy, and I was pretty happy about that. But I also found this statement:

The period from 1960 through 1979 was characterized by a slow buildup of inflation and unemployment, accompanied by volatile and high inflation and volatile growth (Clarida et. al. 2000).

The period from 1960? That stuck in my craw. I always thought of the early 1960s as good years. Inflation was not going up in those years, the JFK years. Camelot, it has been called. Whatever. Still, good years are good years, even if there are but few.

And that was that. I had to stop gathering facts on the history of Federal Reserve policy. I had to call a halt, and put the team on the inflation of the early 1960s.

Yeah. Yeah, I'm the team. I'm it.

Farmer included a reference in his problematic sentence. He included a goddam reference. As if one needs the wisdom of some authority in order to find inflation on a graph. And, don't you know, the thing wouldn't get out of my head. So I had to track down the reference. (Clarida et. al. 2000).

Farmer's list of references includes two for the name Clarida, one of them from the year 2000. I Googled "Monetary Policy Rules and Macroeconomic Stability: Evidence And Some Theory", and found it right away.

http://www.nyu.edu/econ/user/gertlerm/qje00.pdf

And right at the start of that PDF I found this, the first sentence of the Introduction:

"From the late 1960s through the early 1980s, the United States economy experienced high and volatile inflation along with several severe recessions."

That neither contradicts nor supports the statement Roger Farmer attributes to Clarida et al, that

The period from 1960 through 1979 was characterized by a slow buildup of inflation and unemployment, accompanied by volatile and high inflation and volatile growth.

Okay, the volatility -- in the late 1960s -- agrees with Farmer's version, sure. But there's nothing about including the early 1960s in that hot mess. Nothing. No slow buildup of inflation beginning in 1960. No. And let me say again, I think it is pretty odd that Farmer chooses to support his statement with a reference. If you don't follow up, you end up thinking Clarida et al did a study that showed inflation increasing since 1960. I'm not finding that study in Clarida et al.


I really don't want to read all 34 pages just to see if Clarida et al actually *DO* make reference to rising inflation in "the period from 1960". Eh, I'll just search for 1960.

Here's something, on page 167 (page 21 of 34, the PDF reader says):

As De Long argues, the initial build-up of inflation in the late 1960s and early 1970s occurs prior to the first oil shock.

Yeah, forget the oil shock. I'll get back to that later. Clarida et al are happy to work with "the initial build-up of inflation in the late 1960s" -- not 1960, nor the early 1960s.

This is twice, so far, that the Clarida PDF refers to a period beginning in the late 1960s. Not one that begins in 1960.

//

All told, the character sequence 1960 occurs five times in the paper, as follows:

page 147: "From the late 1960s through the early 1980s, the United States economy experienced high and volatile inflation ..."

page 155: "The data are quarterly time series spanning the period 1960:1–1996:4. With one exception, we obtain the data from CITIBASE ..."

page 167: "The figure shows three-quarter centered moving averages of the real oil price against inflation over the period 1960:1–1997:1. As De Long argues ..."

again page 167: "As De Long argues, the initial build-up of inflation in the late 1960s and early 1970s occurs prior to the first oil shock."

page 168 in a footnote: "... percent of the variation in the GDP deflator over the period 1960:1 to 1984:4."

and that's it. I hope it was good for you.

//

The character sequence 1961 does not occur in the PDF (or at least, a Firefox search didn't find it).
Nor 1962.
Nor 1963.
Nor 1964.
Nor even 1965.

Farmer's got some nerve attributing the rising inflation since 1960 idea to Clarida et al. If you know the guy, tell him I need a clarification.

//

I went to FRED:

Graph #1: Three Measures of Inflation (annual rates)
The earliest date I can begrudgingly admit to is 1962. Or, for the GDP Deflator, 1964. If you look, you can see a bounce between 1954Q4 and 1959Q2, a smaller bounce between 1959Q2 and 1961Q3 maybe, and a still smaller bounce between 1961Q3 and 1963Q2. The bounces get smaller and smaller, suggesting that inflation was still on a downtrend as of 1963Q2 -- and even after 1963Q2, as the series of bounces has fizzled out completely by 1964!

Granted, if you look at the underside of those lines on the graph, you can see an upward trend beginning in 1962. Possibly, the earlier lows in 1959Q2 and in 1955 are related -- they do suggest a trend of increase -- but those lows are sparse and intermittent; the evidence is surely weak. On this graph, at least.

Hmm. I have already explained both the dying trend of falling inflation and the awakening trend of rising inflation. The odd thing is that, like Roger Farmer, I used 1960 as the turning point.

Don't be too hard on me for that.

Sunday, October 4, 2015

Levels and Growth Rates of Debt and Income


Yesterday we looked at the growth rates of household debt and disposable income:

Graph #1: Household Debt Growth less Disposable Income Growth
Where the line is above zero, debt is growing faster than income.
Where it is below zero, income is growing faster than debt

We looked also at the level of household debt relative to the level of disposable income:

Graph #2: Household Debt (in billions) relative to Disposable Income (in billions)

Both looks are important. But each graph leaves out half the important stuff. So I took the calculations for the two graphs and just multiplied them together:

Graph #3: (Debt Growth/Income Growth)*(Debt Level/Income Level)

The early years' activity on Graph #1 is reduced on Graph #3 because the level on Graph #2 is low. The late years' activity on #1 is exaggerated on #3 because the level on #2 is high.

Between 2000 and 2010 the graph now runs higher than the mid-1980s peak, not lower. That seems right. And in the years before 1966 the decline no longer starts immediately, but is delayed until perhaps 1963.

Saturday, October 3, 2015

1966


The Way We Were:
"The Way We Were, and Should Be Again"
by Jude Wanniski
The Wall Street Journal, November 11, 1994

"Why do you think President Clinton isn't getting credit for the good economy?" a producer of CNBC's "Business Insiders" asked me as we prepared for the show.

I asked the young man how old he was, and when he replied "29," I told him bluntly that he was too young to know what a good economy looked like — that you have to have lived in the 1950s and 1960s to have experienced a good economy.

By a good economy I mean one that is not only expanding, but is also employing the nation's human and physical resources at a relatively high degree of efficiency. In my experience, in these terms the U.S. economy has been contracting since the late '60s, and is now nowhere near the levels reached earlier.

You have to have lived in the 1950s and 1960s to have experienced a good economy, Wanniski says. And In my experience, in these terms the U.S. economy has been contracting since the late '60s.

The good economy came to an end in the late 1960s, he says.

//

Steve Keen on the level of private debt:
On current trends it will take till 2027 to bring the level back to that which applied in the early 1970s, when America had already exited what Minsky described as the "robust financial society" that underpinned the Golden Age that ended in 1966.

According to Minsky, Keen says, the Golden Age ended in 1966.

//

Suppose we take FRED's numbers for Household Debt and for Disposable Personal Income, look at the growth rates of these two series, and subtract income growth from debt growth. Where the result is greater than zero, debt is growing faster than income. Where it is less than zero, income is growing faster than debt:

Graph #1: Household Debt Growth less Disposable Income Growth
The plot first goes below zero in 1966. Coincidence?

Probably not.

Look at the same two datasets another way. Consider household debt in billions, relative to disposable personal income in billions. Where the line is going up, debt is growing faster. Where the line is going down, income is growing faster:

Graph #2: Household Debt (in billions) relative to Disposable Income (in billions)
The ratio reaches a turning point in 1966. At the same moment Graph #1 shows the number moving from above zero to below zero, Graph #2 shows a change from uptrend to downtrend.

You should be comfortable with the thought that both graphs show the same change in 1966: Debt growth was faster than income growth before 1966, and slower than income growth for some years after 1966.

But perhaps Graph #2 brings something to mind that Graph #1 didn't: inflation. It was just around 1966 that inflation started pushing prices and incomes significantly higher. Income went up, prices went up, and new borrowing to pay for new purchases on credit went up, but existing debt was unaffected.

Inflation drove income up, but it did not drive existing debt up. Income grew faster than debt as a result, and both graphs show it.

//

Minsky pegs 1966 as the end of a golden age. Wanniski pegs the late 1960s.

How 'bout that.

Friday, October 2, 2015

Success changes the circumstances that led to success, leading to failure


Greenewable’s Weblog links to This Sociological Theory Explains Why Wall Street Is Rigged for Crisis at The Atlantic. It opens with a great story:
On October 25, 1962, a bear tried to climb the perimeter fence at the Duluth Sector Direction Center, a sensitive U.S. military installation in Minnesota, setting off an alarm during a DEFCON 3 alert. The alarm signal was connected to a mis-wired klaxon at Volk Field in Wisconsin, and the blaring klaxon led to an immediate order to launch aircraft. Pilots of nuclear equipped F-106A’s were taxiing down the runway to respond to the start of nuclear war when the error was discovered. A car flashing its lights raced from the command post to the tarmac and stopped the jets.

This near brush with nuclear catastrophe, brought on by a single foraging bear, is an example of what sociologist Charles Perrow calls a “normal accident.” These frightening incidents are “normal” not because they happen often, but because they are almost certain to occur in any tightly connected complex system....

Further back, in a harbinger of what was to come in the financial crisis of 2008, we can look to the 1998 failure of Long Term Capital Management. The hedge fund had made a bad bet on derivatives tied to the Russian market, and its collapse threatened to cause a chain reaction throughout the world financial system. The traders at Long Term Capital were no rookies. Among their advisors were Myron Scholes and Robert Merton, 1997 winners of the Nobel Prize in Economics for their path-breaking work on a "new method to determine the value of derivatives."

Normal accidents, like these, occur because two or more independent failures happen and interact in unpredictable ways.

I don't know. Maybe. Sure, why not. But I don't like it already by the second paragraph: "These frightening incidents ... are almost certain to occur in any tightly connected complex system".

So, we can stop looking at the economy and we can stop trying to figure out what went wrong? That's what it sounds like they are saying. But no, we didn't get the financial crisis of 2008 because the economy is a "tightly connected complex system" and we happened to have a coincidence of "independent failures". No, we didn't.

There is some good stuff in the article, though. That part about two things interacting to produce unpredictable results, I like that. Doesn't have to be two failures, though. It could be two successes. And they don't have to be independent. They could be related.

And the problem may end in failure not because the results were unpredictable, but because when we started seeing the results, we didn't stop to wonder if they might be related to our successes.

Thursday, October 1, 2015

How much of that was interest?


If we take "Household Debt Service Payments as a Percent of Disposable Personal Income" (TDSP) and multiply it by "Disposable Personal Income" (DPI) ((and divide it by 100)) we get Household Debt Service Payments in billions of dollars. Those debt service payments include both interest and principal.

What portion of those debt service payments is attributable to interest costs? And what portion to principal?

Take "Monetary interest paid: Households" (W292RC1A027NBEA) and divide it by Household Debt Service Payments in billions ((and multiply it by 100)) to get interest costs as a percent of debt service payments:

Graph #1: Interest as a Percent of Household Debt Service Payments
Eh, kinda boring.

Okay, let me add a line showing the other part, principal as a percent of household debt service payments:

Graph #2: Interest (blue) and Principal (red) as Shares of Household Debt Service
Now it is pretty easy to see a decline in interest and an increase in principal since the early 1980s. Many factors must have contributed to these trends.